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South Korea postpones tax on cryptocurrencies for 2 years

The 20% tax on digital assets in South Korea, which was due to apply from 2023, has been postponed for another two years.

Tax announced in 2020

Before the announcement of the 2-year delay, the hefty 20% tax on crypto-asset earnings was due to go into effect on January 1, 2023. However, thanks to strong investor protests, the plan was pushed back to 2025. .on cryptocurrencies was first introduced in December 2020, when the government announced the 20% tax rate on cryptocurrency earnings above KRW 2.5 million ($1974.10). Under the initial plan, the tax was supposed to be imposed from January 1, 2022. However, the Democratic Party and the center-right People’s Power Party decided in November 2021 to defer it for a year.

Investors protest taxes

Despite the many delays, the January 1, 2023 timeline did not please investors, who claimed that the tax could harm a growing cryptocurrency industry in South Korea. Another argument they made was that the tax threshold (2.5 million KRW) was too low, especially considering that the proposed stock tax is levied on capital gains above 50 million KRW ($39,475.76). This was noteworthy as one of the promises made by the country’s president-elect Yoon Suk-yeol during his campaign was to tax cryptocurrencies to the same extent as other financial assets.

Minister defends postponement

Choo Kyung-ho supported the investors’ demand to defer taxes in May 2022, when he has yet to be confirmed as Deputy Prime Minister and Minister of Economy and Finance. During a National Assembly confirmation hearing, Choo stated that a 20% tax on the cryptocurrency industry would be detrimental at this time. He proposed waiting for the market to mature and for legislation to guarantee transparency and investor protection before charging the tax.

Fiscal policies in the world

Taxing capital gains from cryptocurrencies has become a hot topic in many countries. While some countries want to lighten the industry as much as possible and have therefore deferred imposing a tax, others are eager to bank the profits through taxes. Germany, like South Korea, has maintained a more crypto-friendly tax policy after announcing zero taxes on held cryptocurrencies for more than a year. At the end of the spectrum, Portugal, known to be a crypto haven for its zero-tax policy, is reconsidering a tax on crypto profits. Investors in India are also saddled with the 30% cryptocurrency tax announced at the last budget meeting and are choosing to take their business abroad.